November 22, 2016

Just hours after the following blog went live on Tuesday, major media reported that a Texas judge blocked implementation of the new overtime regulation in response to challenges by a group that included 21 states and businesses. The future of this regulation is now in question.

On Dec. 1, an additional 4.2 million U.S. workers will potentially be eligible for overtime pay when the annual earnings cap doubles to $47,476 under the new federal overtime rule.

Retail workers bracing for the holiday onslaught will be among those receiving overtime if they work more than 40 hours per week but earn less than $47,476. The previous cap, $23,660, was set in 2004.

Under the new rule, employers must pay overtime to any eligible full-time or part-time worker, according to the U.S. Department of Labor (DOL), which produced the above video explaining who will benefit from its recent rule change.

This will mean bigger paychecks for low-wage workers but permanent raises for others earning slightly more. That’s because one option for employers seeking to avoid overtime pay is to increase annual pay for, say, middle managers to just over the $47,476, exempting them from the rule.

Inevitably, some employers will try to ignore the rule. It’s important that workers know their rights under the law – so watch the video and read this. The overtime rule is enforced by the DOL’s wage and hour division offices in 50 states. …Learn More

November 10, 2016

Wyoming government has brought some 535 employees of the state’s executive, legislative and judicial branches into its retirement savings plan since July 2015 under a new policy of automatically enrolling each new hire.

They are free to withdraw from the plan at any time, but only 15 of the 535 have done so – “and not a complaint from anybody,” said Polly Scott, who manages the savings plan and heads employee retirement education.

This technique, borrowed from behavioral economics, addresses the inertia that prevents many people from ever signing up to save in their employer’s plan. So why wait for them to join? Instead, Wyoming uses inertia to benefit state workers: when people are automatically enrolled, research shows, they tend to stay put and save.

This is one piece of a larger effort to educate government workers about what’s required to properly prepare for retirement – and nudge them to do it. The 457 retirement savings plan is crucial. Wyoming’s retired state workers receive Social Security, but the inflation adjustment in their traditional defined benefit pension has virtually been eliminated for the near future. The 457 plan “is voluntary, but it’s not optional if you want a secure retirement,” Scott said.

The heart of the state’s education efforts is a website titled “Your Whole Story” that is on point and explains in clear language likely to benefit employees. Employees are encouraged to increase how much they’re already saving, resist the temptation to withdraw their savings prematurely, and prepare themselves for a long time in retirement in an era of increasing life expectancy.

This initiative is based on a campaign sponsored by the National Association of Government Defined Contribution Administrators (NAGDA) – Scott was NAGDA’s president last year – and designed by the National Association of Retirement Plan Participants. Other states use some version of “Your Whole Story,” including the Missouri State Employees’ Retirement System and Montana Public Employee Retirement Administration.

One problem Wyoming is tackling is young adults who hurt their retirement prospects by withdrawing money from their 457 plans when they leave their state jobs, which “means they’re spending it,” Scott said. Another issue is that more older workers are rolling 457 savings over to private IRAs, which can have higher fees. …Learn More

Chief among them is that they don’t have the same access to traditional pensions and retirement savings plans that white Americans have, primarily because of where Latinos tend to work. Two out of three Latino workers – many people prefer the term Hispanic – lack a 401(k)-style plan in their jobs, the U.S. Social Security Administration and other sources report.

The National Hispanic Council on Aging recently called the older Hispanic population “the least prepared for retirement of any ethnic group.”

One reason cited is that they are more likely to work for small businesses, which often don’t set up a plan. Latinos are also disproportionately employed in low-paid cleaning, landscaping, and food services occupations, and a mere 12 percent of all low-income older individuals are saving for retirement. Median earnings for Latino-Americans, at $45,000 per year, are about one-third lower than median earnings for whites, according to the U.S. Census.

Things are rapidly changing, however: more Latino-Americans than ever are attending college and completing their degrees, which will improve financial security for this college-bound group and their families.

But while Latinos have, like past waves of immigrants, fully integrated into American society in recent decades, many have not yet integrated into the mainstream institutional structures that support retirement. Until that happens, the lack of access will create greater financial challenges for the Latino community.Learn More

October 13, 2016

Open enrollment starts Oct. 15 for people who’ve signed up for Medicare and must buy into or change their supplemental Advantage or Part D prescription drug plans.

The Medicare Rights Center in New York tells me that you can “make as many changes as you need during this period” and that “only your last coverage choice will take effect Jan. 1.”

A long list of resources appears at the end of this blog to help Medicare beneficiaries through the enrollment process. But there’s a lot of hoopla around the Oct. 15-Dec. 7 enrollment period, so it’s important to know what Oct. 15 is not about.

One’s birthday – and not a date on the calendar – determines when people should initially enroll in the Medicare program. Most people turning 65 who are not covered by their own or their spouse’s employer health insurance at work are required to enroll in Medicare Parts A and B during a seven-month period that starts three months prior to their 65th birthday. During this seven-month window, new Medicare participants must also sign up for their Part D drug plans – or risk paying a lifelong penalty. Oct. 15 is not the trigger date for selecting Medigap plans either.

Here’s what the Medicare open enrollment that starts Oct. 15 is about: figuring out the right Advantage or Part D drug plan to buy or switch to. This is a complex process that involves multiple choices, anticipating your future health care needs and expenses, and a lot of research into the plans available.

It’s an implicit recognition of Medicare’s complexity that so many resources are available to help with this process, from private and government-funded consultants to YouTube videos and detailed web pages on the Medicare website. The following resources and blogs can help answer your questions: …Learn More

October 11, 2016

The Center for Plain Language had this to say about the legal fine print that overran one advertisement for an investment product:

“Once again a financial institution that expects me to trust them with my money makes it impossible for me to know what they are going to do with my money.”

The Center had singled out a Charles Schwab & Co. ad for a Wondermark “award” for unintelligible writing. But the center might have been referring to any of the hundreds of financial institutions that inundate us daily with online and television ads or the credit card offers that come in the mail.

Consumers are often faulted for making poor financial decisions, but surely much blame falls on financial companies that present consumers with terms of use agreements chock full of legalese or with disclosures that are difficult to read and understand.

Financial minefields pervade all aspects of our lives too. The 2016 Wondermark awards went to Victoria’s Secret for the “mumbo-jumbo” in its lengthy credit card agreement and to a Phoenix healthcare company that offers discounts to low-income customers – but first, they must decipher the confusing chart that explains who qualifies.

The person who nominated the healthcare company for an award said its discount information “seems like a classic case of the 0.2% who understand this chart will receive 85% of the Medical Financial Assistance, but they are clearly 400% above the average American who just got out of the hospital and has 0% of a clue as to what they’re talking about.” [Oddly, this chart seems to indicate that customers with higher incomes get larger discounts.] …Learn More

September 1, 2016

One out of every 10 Generation X mothers is single – many more than in the generation born during World War II.

Nearly two-thirds of single older people are the survivors of divorce – far more than in the past.

About one in three couples has moved away from their hometowns and from both of their mothers – blame this geographic mobility on the growing share of U.S. workers who are college educated.

These are just a few of the dramatic changes in U.S. family structure and behavior that have developed over the past half century. These changes have had enormous financial consequences for everyone, especially women.

Squared Away has documented some of the financial impacts in previous blogs. A Lucky 7 such blogs, most of them based on studies by the Retirement Research Consortium, are summarized below (with links to each one):

Women are having babies five years later, on average, increasing their earnings substantially over their lifetimes.

About half of Americans don’t live near their mothers, creating new pressures for caregivers. This video explains who they are.

In the aftermath of divorce, many women figured out how to rebound in the labor force and earn more.

But when it comes to retirement preparedness, a doubling in the divorce rate since 1990 has put more baby boomers at a financial disadvantage.

Stepchildren, divorced parents, blended families – the structure of the parent-child relationship has grown more complex, and so have the parents’ wills. …